Tuesday, November 25, 2008
Depending on the source one can conclude that United States consumers enjoy access to a robustly competitive and nearly ubiquitous marketplace for inexpensive broadband Internet access, or they suffer the consequences of a tightly concentrated industry offering inferior service at high rates. On one hand, the Federal Communications Commission ("FCC"), the National Telecommunications and Information Administration ("NTIA") and some sponsored researchers offer a quite sanguine outlook, possibly influenced by their appreciation for the political and public relations dividends in compiling positive results.
On the other hand, other statistical compilations and interpretations show the U.S. behind in terms of market penetration and price, even trailing some nations that have similarly unfavorable geographical and demographic characteristics. In the light of the extraordinary global success achieved by domestic ventures in information and communications technology ("ICT"), it would appear counterintuitive for some current broadband statistics to show the United States lagging other nations in terms of favorable access to next generation networks.
The FCC has used evidence of robust market penetration and competition in broadband markets to support an aggressive deregulatory campaign. Advocates for even more deregulation regularly cite the Commission's statistics as evidence that the unfettered marketplace can achieve broadband access and affordability goals. Both the Commission and many stakeholders assume the frequently cited statistics present a true picture of the marketplace. A recent NTIA document concludes that the United States has achieved the goal of "universal, affordable access for broadband technology by the year 2007" articulated by President Bush in 2004.
This paper will examine the United States broadband penetration and pricing statistics with a critical eye, in light of other contradictory compilations by credible organizations including the International Telecommunication Union and the Organization for Economic Cooperation and Development. Additionally the paper will compare and contrast the FCC's identification of broadband options in the author's home zip code with what actual options the author could identify.
The paper concludes that the FCC and NTIA have overstated broadband penetration and affordability by using an overly generous and unrealistic definition of what qualifies as broadband service, by using zip codes as the primary geographic unit of measure and by misinterpreting available statistics. Additionally the FCC includes as competition services lacking any true cross-elasticity with other services based on substantial price differences.
The paper concludes that credible calculations, using better calibrated measures, show a mixed outcome based on different geographical focus. Some U.S. residents, particularly in urban locales, enjoy comparatively excellent broadband service, while rural residents may have ample access options, albeit at comparatively high prices in light of limited price competition. The paper concludes that the absence of robust price competition among many facilities-based broadband operators in many areas of the nation challenges many of the assumptions built into recent FCC policy initiatives that seek to abandon consumer safeguards. The paper also concludes that a statutory mandate to promote universal access to advanced telecommunications capability requires the FCC to collect and disseminate credible statistics on next generation network deployment.
Donwload the paper from SSRN here.